500 Dallas Street, Suite 1000Houston, Texas 77002(713) 369-9000

www.kindermorgan.com

2005 ANNUAL REPORT

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Kinder Morgan, Inc. (NYSE: KMI) has delivered an average annual return to shareholders

of approximately 39% from July 1999 through 2005.

OFFICE OF THE CHAIRMANRichard D. Kinder Chairman and Chief Executive Officer

C. Park ShaperPresident

Steven J. KeanExecutive Vice President and Chief Operating Officer

OPERATING OFFICERSIan D. AndersonPresident, Kinder Morgan Canada

Jeffrey A. ArmstrongPresident, Terminals (KMP)

Thomas A. BanniganPresident, Products Pipelines (KMP)

R. Tim BradleyPresident, CO2 (KMP)

R. L. (Randy) JespersenPresident, Terasen Gas

Scott E. ParkerPresident, Natural Gas Pipelines

Paul R. SteinwayPresident, Power

Daniel E. WatsonPresident, Retail

CORPORATE OFFICERSRichard L. BullockVice President and Chief Tax Officer

Kimberly Allen DangChief Financial Officer and Vice President,Investor Relations

W. Garner DotsonVice President, Internal Audit

David D. KinderVice President, Corporate Development and Treasurer

Joseph ListengartVice President, General Counsel and Secretary

Henry W. NeumannVice President and Chief Information Officer

Larry S. PierceVice President, Corporate Communications

James E. StreetVice President, Human Resources,Administration and Information Technology

Debra M. WitgesVice President and Controller

BOARD OF DIRECTORSEdward H. Austin, Jr.Director and Executive Vice PresidentAustin, Calvert & Flavin, Inc.San Antonio, TX

Charles W. BatteyConsultant and Community VolunteerOverland Park, KS

Stewart A. Bliss (1), (2)

Financial Consultant and Sr. Business AdvisorDenver, CO

Ted A. Gardner (3)

Managing Partner,Silverhawk Capital PartnersCharlotte, NC

William J. HyblChairman, Chief Executive Officer and TrusteeEl Pomar FoundationColorado Springs, CO

Richard D. KinderChairman and Chief Executive Officer Kinder Morgan, Inc.Houston, TX

Michael C. MorganPresidentPortcullis Partners, L.P.Houston, TX

Edward Randall, III (4)

Private InvestorHouston, TX

Fayez S. SarofimChairman and PresidentFayez Sarofim & Co.Houston, TX

James M. StanfordPresidentStanford Resource ManagementCalgary, AB

H.A. True, IIIOwner/DirectorTrue CompaniesCasper, WY

Douglas W. G. WhiteheadPresident and Chief Executive OfficerFinning International Inc.Vancouver, BC

(1) Lead Director(2) Chairman, Audit Committee(3) Chairman, Compensation Committee(4) Chairman, Nominating and

Governance Committee

SHAREHOLDER INFORMATIONHeadquarters: 500 Dallas Street, Suite 1000Houston, TX 77002(713) 369-9000

Exchange Listing:New York Stock ExchangeTicker Symbol: KMI

Transfer Agent, 1099s and Cash Dividends:Computershare Trust Company, N.A.(formerly EquiServe)PO Box 43069Providence, RI 02940-3069(800) 847-4351www.computershare.com/equiserve

All other inquiries: Investor Relations(800) 324-2900 or (713) 369-9490E-mail: kmi_ir@kindermorgan.com

Please visit our web site at

www.kindermorgan.comfor investor information

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Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy transportation, storage and distribution companies in North America with approximately 43,000 miles of pipelines, 150 terminals and 1.1 million natural gas distribution customers.KMI owns the general partner of Kinder Morgan Energy Partners, L.P. (NYSE: KMP), one of the largest publicly traded pipeline limitedpartnerships in the United States. KMI operates the assets of KMP through the delegate of the general partner, Kinder MorganManagement, LLC (NYSE: KMR). Combined, the Kinder Morgan companies have an enterprise value of approximately $35 billion.

NGPL (KMI)

NGPL Natural Gas Storage (KMI)

Retail Natural Gas Distribution (KMI)

Gas-Fired Power Plants (KMI)

Products Pipelines (KMP)

Products Pipelines Terminals (KMP)

Transmix Facilities (KMP)

Natural Gas Pipelines (KMP)

Natural Gas Storage (KMI-KMP)

Natural Gas Processing/Treating Plants (KMI-KMP)

CO2 Pipelines (KMP)

CO2 Oil Fields (KMP)

Crude Oil Pipelines (KMP)

Terminals (KMP)

Terasen Gas (KMI)

KM Canada Pipelines (KMI)

KM Canada Terminals (KMI)

Indicates number of facilities in area

Kinder Morgan Headquarters

(2, 3, 5)

LEGEND

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S&P 500 Index

July 8,1999

Dec. 31,1999

Dec. 31,2000

Dec. 31,2001

Dec. 31,2002

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Dec. 31,2004

Dec. 30,2005

KMI UTY Index

TOTAL SHAREHOLDER RETURNS

KMI 2006BUDGETED SEGMENT EARNINGS

(including earnings attributable to KMI’s investment in KMP)

COMPANIES RUN BY SHAREHOLDERS FOR SHAREHOLDERS

Source: Bloomberg

(Since KN Energy merger was announced, with dividends reinvested)

KMP 2006BUDGETED DISTRIBUTABLE CASH FLOW

KMP39%

Terminals19%

ProductsPipelines

27%

Natural GasPipelines

25%

CO229%

NGPL30%

Terasen Gas and Retail

23%

KMI: 39% annual return

Other1%

KMCanada

7%

KINDER MORGAN, INC. (KMI)

General Partner of KMP – KMI owns the general partner of and has a significant limited partner interest in Kinder Morgan EnergyPartners, L.P. (KMP).

Kinder Morgan Canada (formerly Terasen Pipelines) – Second largesttransporter of crude oil and petroleum products in Canada. Totaltransportation capacity of about 960,000 barrels/day throughapproximately 2,800 miles of pipelines in Canada and the U.S. Also has five terminals with about 5 million barrels of capacity.

Natural Gas Pipeline Company of America (NGPL) – Largest transporter of natural gas to the high-demand Chicago market.Transports up to 5.8 billion cubic feet (Bcf )/day of natural gasthrough approximately 9,800 miles of pipelines and has 250 Bcf of working gas storage capacity.

Power – Owns an interest in three natural gas-fired power plants.

Retail Natural Gas Distribution – Provides natural gas distribution and related services to approximately 245,000 residential, commercial, agricultural and industrial customers in Colorado,Nebraska and Wyoming.

Terasen Gas – Largest local distribution company in BritishColumbia and third largest in Canada. Provides natural gasdistribution and related services to almost 900,000 customers.

KINDER MORGAN ENERGY PARTNERS, L .P. (KMP)

CO2 – Largest transporter and marketer of carbon dioxide forenhanced oil recovery projects in the U.S. Transport over 1 Bcf/dayof CO2 through more than 1,300 miles of pipelines. Second largestoil producer in Texas with significant interests in three oil fields anda crude oil pipeline in the Permian Basin.

Natural Gas Pipelines – Major transporter of natural gas in Texas,Rocky Mountain and Midwest areas. Approximately 15,000 miles of pipelines with transportation capacity of about 9 Bcf/day andworking gas storage capacity of about 35 Bcf. Also own/operategathering, treating and processing facilities.

Products Pipelines – Largest independent transporter of petroleumproducts in the U.S. Transport over 2 million barrels/day ofgasoline, jet fuel, diesel and natural gas liquids through more than10,000 miles of pipelines. Approximately 60 terminals have astorage capacity of about 29 million barrels for refined petroleumproducts. Also have five transmix facilities.

Terminals – Largest independent terminal operator in the U.S.Approximately 85 terminals in this segment handle more than 80 million tons annually of coal, petcoke and other materials. Also have a liquids storage capacity of over 40 million barrels forpetroleum products and chemicals, and about 55 transload facilities.

DEAR SHAREHOLDERS

A lawyer friend of mine explained his strategy for winning overjuries – if the facts are on your side, argue the facts; if the law ison your side, argue the law; if neither is on your side, just jumpup and down and argue. Some annual reports follow a versionof that theory – if the financial results are good, emphasizethem; if the financial results are bad, stress how the company ispositioning itself for great future results, even if those results are a long way off.

Fortunately at Kinder Morgan, Inc.(NYSE: KMI), the financial results have beenpretty good for an extended period of time and we are building a real foundation forstrong future growth. We did a lot in 2005 toposition the company for the future. Amongour achievements, KMI acquired Terasen Inc.,a Canadian company with a large natural gasdistribution utility in British Columbia and a pipeline networkthat gives us access to what is expected to be a tremendousoilsands play in Alberta. Additionally, our affiliated masterlimited partnership, Kinder Morgan Energy Partners, L.P.(NYSE: KMP), laid the groundwork to build what will becomeone of the largest pipelines ever constructed in America andwill transport natural gas from the Rockies to the easternUnited States; secured commitments to build a pipeline inLouisiana that will move natural gas from liquefied natural gas (LNG) terminals along the Gulf Coast into the country’spipeline network; and, purchased a large petroleum coketerminal network in Texas that makes us the largest independent handler of petcoke in the country.

2005 IN REVIEW

Led by a terrific performance by Natural Gas PipelineCompany of America (NGPL) and our ownership of thegeneral partner of KMP, KMI reported strong earnings for2005. We generated approximately $687 million in cash

flow and had earnings per share of $4.31 from continuingoperations before certain items, up 13 percent over 2004 andsignificantly ahead of our budget of $4.22. These resultsexclude the benefit of one month of contributions from theTerasen acquisition. In January 2006, our board of directorsdeclared a 17 percent increase in the quarterly dividend, raisingit from $0.75 per share ($3.00 annualized) to $0.875 per share($3.50 annualized).

In total, income from continuingoperations before certain items for 2005was $554.6 million, or $4.45 per dilutedshare, compared to $475.8 million, or$3.81 per share, for 2004. Income from continuing operations, including the impact of certain items, was $552.2 million for 2005, or $4.43 perdiluted share, compared to $528.5 million,or $4.23 per share, for 2004.

As I say every year, we are not without challenges. In 2005,we had to overcome the impact of two major hurricanes thataffected many of our business operations along the Gulf Coast.While I was pleased with how we fared operationally duringthe hurricanes, I was even more proud of the way ouremployees responded to protect our assets and serve ourcustomers, particularly in spite of the fact that many of themexperienced personal losses from the storms. Regulatorymatters, such as challenges to the rates charged by our regulatedoperations, potential environmental issues related to operatingour assets, the threat of terrorism and increasing interest ratesare among the ongoing risks that we must manage effectively.

OUR STRATEGY

In my view, while annual financial results and shareholderreturns are important, they are more meaningful and indicatehow well a company’s strategy is working when viewed over anumber of years. I think most would agree that our long-termtrack record has been fairly impressive. KMI has delivered an average annual return to shareholders of approximately 39 percent from July 1999, when we announced the creation of KMI by merging the general partner of KMP with KN Energy, through year-end 2005. I believe our strategy is one that will continue to produce solid financial results and returns to our shareholders for many years to come.

Our strategy is very simple and unchanged from prioryears: 1) we own and operate quality midstream energy assets –primarily pipelines and terminals that handle natural gas, crudeoil, gasoline, jet fuel, diesel, carbon dioxide, coal and othermaterials – that produce consistent fee-based cash flow andearnings; 2) we run these assets in the most efficient, cost-effective way possible with a commitment to public safety andprotection of the environment; 3) we grow our businessthrough a combination of expansions, acquisitions and internalgrowth in both volumes and tariffs; and, 4) whenever appropriate, we own our assets in our affiliated master limited

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FREE CASH FLOW PER SHAREEPS

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2003 2004 2005

KMI EPS AND FREE CASH FLOW*

* Reflects diluted EPS from continuing operations adjusted for asset sales and excludingcertain items and loss from early extinguishment of debt. Cash flow is earnings beforeDD&A, less cash taxes and sustaining capital expenditures. Excludes Terasen in 2005.

partnership, KMP, which is the most tax-advantaged method of owning these types of assets.

A key part of our strategy has always been to identifyimportant trends in the energy business and then invest capitalto exploit those trends to our benefit. In other words, find thebig waves and ride them. We’ve done a pretty good job of thisin the past, but the waves are currently bigger and moreenticing than at any time in recent memory. For example,shifting sources of supply are creating many opportunities to build or expand infrastructure to support the oilsands playin Alberta, LNG growth along the Gulf Coast and increasingnatural gas production in the Rockies.

To capitalize on these trends, we must be able to executeour strategy, and our method of implementation is alsorelatively simple: 1) we allocate our capital in a very disciplinedway, using consistent return hurdles and requiring a highdegree of confidence that they will be met before we spendmoney on a project; 2) we try very hard to be a low-costoperator by eliminating perks and needless corporate overhead(no corporate jets, sports tickets, club memberships, supple-mental benefit plans for senior executives or glitzy annualreports), as we prefer to spend our money on the things thatreally matter, like maintaining and expanding our assets; and, 3) we relentlessly pursue operational excellence by targetingcontinuous improvement in specific areas measured byobjective metrics comparing our performance with industrystandards and with our own prior record.

We also try hard to align the interests of senior manage-ment with that of our shareholders. All of our senior managershave restricted stock that only vests over an extended periodand most of their cash compensation comes in the form ofbonuses, which are payable only if we meet specific financialtargets established at the beginning of each year. For what it’sworth, I own about 18 percent of KMI and receive $1 per yearin salary with no bonuses, stock option grants or restrictedstock. Thus, my interests are totally aligned with the rest of the shareholder community.

FUTURE GROWTH

We made significant investments in 2005 to position bothKMI and KMP for future growth. In addition to the

$5.9 billion Terasen acquisition at KMI, 10 acquisitions were made at KMP totaling approximately $470 million.Combined, both companies also invested more than $700 million in expansion projects.

The growth opportunities in Canada being driven byincreased oilsands production in Alberta appear to be evengreater than we initially thought when the Terasen deal wasannounced in August 2005. A million barrels a day of oil are currently coming out of the oilsands and production isexpected to double over the next several years. In total, expertssay there is more oil in the Alberta oilsands than in SaudiArabia. How do we fit in? Initially by utilizing the pipelinenetwork we acquired from Terasen and renamed KinderMorgan Canada. This system transports bitumen from theoilsands near Fort McMurray, and crude oil and petroleumproducts from Edmonton to marketing terminals and refineriesin Vancouver, British Columbia, and Puget Sound inWashington state. We also transport crude oil from Alberta tothe Rocky Mountain and Midwest regions of the United States.By aligning market demand with timely incrementaldevelopment, we expect to complete significant expansions of this pipeline system into the next decade. For example, we currently have shipper support in place for about C$1.5 billion in expansions that will increase capacity on the Corridor and Trans Mountain pipelines in Canada. We are also pursuing other opportunities in Alberta and BritishColumbia including building new pipelines and terminals,using CO2 injection to increase oil production from maturefields and CO2 sequestration.

The Rockies Express Pipeline is going to be one of thelargest pipelines ever built in America and will transport about1.8 billion cubic feet per day (Bcf/d) of natural gas fromprolific supply basins in Wyoming and Colorado to easternOhio. KMP and partner Sempra Energy secured bindingcommitments from shippers for all of the capacity on thepipeline, and given sufficient demand, the pipeline may beextended farther eastward. The project is expected to besubstantially accretive to earnings and cash flow beginning in January 2008 when the first segment commences service.The entire project is expected to be completed by June 2009.KMP will operate the pipeline and own between one-half and

Terasen acquisition gives KMI access to Alberta oilsands.

KMI and KMP expect to invest over $1 billion in expansions in 2006.

two-thirds of the project, depending on whether shippersexercise ownership options. Including the Entrega Pipeline,which will interconnect with Rockies Express, this is a projectthat will cost over $4 billion.

Another exciting project is the Kinder Morgan LouisianaPipeline, which will move natural gas from LNG terminalsalong the Gulf Coast into the country’s pipeline network. KMP already has 20-year, fixed-rate agreements in place withChevron and Total to support this approximately $500 millionproject. The pipeline will consist of two segments, including a lateral to NGPL, and will provide 3.2 Bcf/d of takeawaycapacity from the Cheniere Sabine Pass LNG plant underconstruction in Louisiana. The initial project capacity is soldout and KMP is currently in discussions to connect other LNG plants to the pipeline, which may lead to an expansion of the project. The pipeline is expected to be in service in thefirst quarter of 2009.

KMP purchased a large petroleum coke terminal networkin Texas in April 2005 for approximately $247 million. Petcokeis a carbonaceous solid residual by-product of the oil refiningcoking process and is used primarily in the cement and powergeneration industries. This acquisition, combined with otherpetcoke facilities we already operate across the country, allowsus to handle approximately 33 percent of today’s domesticpetcoke market. We believe refineries will process more heavycrude in the future, which will generate more petcoke andenable KMP to continue to expand this business.

There are some other fair-sized waves we’re trying to ride.For example, KMP is expanding two bulk terminals in theSoutheast to handle significant quantities of imported coalpursuant to long-term contracts, enlarging our westernproducts pipelines to move more gasoline and jet fuel intoArizona and Nevada, and adding additional storage capacity at our liquids terminals to handle growing volumes of ethanoland imported petroleum products. While most of these under-takings will be done at KMP, KMI will benefit by virtue of itsownership of KMP’s general partner and a significant portionof its partnership units.

Of course, investors should always be a bit cautious aboutexpansion projects because they inevitably carry a fair amountof execution risk. That said, we generally don’t undertake theseprojects without satisfactory customer commitments, and wehave a pretty good track record of bringing projects in on timeand at budget. As I’ve said many times in these letters andelsewhere, we don’t do projects at Kinder Morgan just to getbigger; we only do them if they earn a sufficient return and,therefore, benefit the shareholders.

OUTLOOK

As part of our commitment to transparency, we once againposted both our KMI and KMP annual budgets on our website following our annual investor conference in January, andwe will track our progress each quarter during our analysttelephone calls which are webcast. At KMI, we expect 2006

recurring earnings of $5.00 per share and cash flow ofapproximately $760 million.

Because KMI generates a tremendous amount of cash flow,we believe that we will continue to be able to raise the dividendon at least an annual basis, while maintaining a strong balancesheet. We are firmly committed to returning excess cash to ourshareholders. We have increased the dividend seven times sinceJuly 2002, and the dividend is now over 17 times greater thanit was at that time. We have also repurchased more than $875 million in KMI shares since 2001. KMI’s debt-to-capitalratio rose to approximately 56 percent at year-end 2005following the Terasen deal, and we expect to bring that backdown to about 50 percent over the next few years, on astandalone basis.

In 2006, KMI and KMP will invest more than $1 billionin capital expansions and only about 20 percent of that amountpertains to projects I previously identified. Put another way,there are additional internal growth opportunities I haven’teven touched upon in this letter.

The purpose of this letter was to explain our strategy,illustrate our track record for delivering value to shareholders,and detail how we have positioned KMI for future growth.Hopefully I’ve accomplished that. If you’re a shareholder, I trust that we can count on your continuing support. If you are not a shareholder, perhaps you will become one. In closing,I want to thank our approximately 8,000 employees for anoutstanding 2005, and I also want to thank Park Shaper andSteve Kean, the other members of our Office of the Chairman,for all of the heavy lifting they did throughout the year. We will continue to strive for both financial and operationalexcellence, meeting our customers’ needs and delivering valueto shareholders. With all of the opportunities that we haveidentified, it’s easy to see why we believe the best is yet to come!

Richard D. Kinder Chairman and CEO

KMP is the largest independent handler of petcoke in the U.S.

BUSINESS OVERVIEW

GENERAL PARTNER OF KMP

For 2005, KMI’s general and limited partner interest in KMPcontributed over $567 million of pre-tax earnings (before certainitems), a 19 percent increase over 2004, and KMI received morethan $593 million in total distributions from its investment inKMP. KMP’s assets generated approximately $1.2 billion indistributable cash flow in 2005, with all four business segmentsreporting increased earnings before depreciation, depletion andamortization (DD&A) compared to 2004. KMP’s success wasattributable to both internal growth and contributions fromacquisitions.

KMP’s Products Pipelines segment delivered 2005 earningsbefore DD&A of $508.3 million, a 7 percent increase over 2004earnings, but short of its published budget. This segment wasimpacted by hurricanes Katrina and Rita and lower thanexpected revenues from the West Coast terminals, the NorthSystem and the Cochin Pipeline. Total refined products volumesincreased by 2.5 percent for the year, excluding PlantationPipeline which was impacted by the hurricanes and relatedrefinery disruptions.

The Products Pipelines segment serves eight of the 10 fastest growing markets in the United States and continues tooffer many growth opportunities in the West and Southeast. Forexample, a $210 million East Line expansion is expected to becompleted by May 2006, which will significantly increasepipeline transportation capacity for gasoline, jet fuel and dieselbetween El Paso, Texas, and Phoenix, Ariz. Additionally, thissegment built and placed into service four new tanks thatincreased the storage capacity of the Carson liquids terminal insouthern California, and acquired three storage tanks and a truckloading rack in San Diego that added capacity to the MissionValley terminal. The CALNEV and Central Florida pipelinesystems in Nevada and Florida, respectively, are implementingactivities to capitalize on ethanol blending opportunities at this

segment’s Southeast terminals and permits are being obtained foran additional $145 million expansion of the East Line.

KMP’s Natural Gas Pipelines segment produced 2005earnings before DD&A of $500.2 million, up 22 percent from2004 and significantly ahead of its published budget of 7 percentgrowth. Growth in this segment was driven by outstandingperformances by the Texas Intrastate Pipeline Group and the Red Cedar gas gathering system, along with contributions fromthe acquired TransColorado Pipeline.

In 2005, the intrastate pipeline system west of Austin, Texas,to the Permian Basin was expanded by converting the remaining254 miles of a previously acquired crude oil pipeline to naturalgas. In early 2006, an expansion of TransColorado wascompleted which increased the transportation capacity availableon the northern part of the pipeline. As noted in Rich Kinder’sletter to shareholders, KMP has secured binding shippercommitments and is moving forward on both the KinderMorgan Louisiana and Rockies Express pipelines. KMP andSempra Energy also acquired the Entrega Pipeline from EnCanain February 2006, which KMP will operate. This 330-milepipeline will connect to and extend the reach of the RockiesExpress Pipeline. KMP will explore opportunities to developstorage along the Rockies Express project to provide additionalgrowth opportunities for shippers and investors.

KMP’s CO2 segment delivered 2005 earnings before DD&Aof $471.2 million, up 33 percent from 2004 and on target withits published budget. The substantial growth in this segment wasdriven by increased oil production at both the SACROC andYates fields, which together have over 5 billion barrels remainingin place. Record production volumes from the McElmo Domesource field, strong natural gas liquids sales and the completionof a power plant that is providing a significant portion of theelectricity at SACROC also contributed to this segment’s results.

Combined, the CO2 business produced over 56,000 barrels/day at SACROC and Yates in 2005, as SACROC fell short of its target and Yates exceeded its goal. KMP tries to avoidcommodity price risk as much as possible, but when such risk is encountered (as in oil production), a long-term hedgingstrategy is used to mitigate the risk and generate more stablerealized prices.

KMP plans to invest more than $350 million in CO2expansions in 2006, the majority of which will occur at1996 1998 1999 2000 2001 2002 2003

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GENERAL PARTNER INTEREST*

*Includes cash distributions to the 2% GP interest; does notinclude limited partner units owned by GP/KMI

$ In Mi l l ions

KMP owns or operates primarily pipelines and terminals.

SACROC, where wells and infrastructure are being added tofurther ramp up production. While KMP will invest less at Yatesthan SACROC, it is confident that solid production at Yates willbe sustained. KMP also intends to pursue growth opportunitiesin the United States related to increasing third-party demand forCO2 and in Canada relative to CO2 transportation, injectionand sequestration.

KMP’s Terminals segment reported 2005 earnings beforeDD&A of $318.1 million, up 21 percent from 2004 andsignificantly exceeding its published budget of 10 percentgrowth. Most of the growth in this segment came fromacquisitions. The financial results in this business unit wouldhave been even stronger without the effects of two Gulf Coast hurricanes.

KMP sees a number of growth opportunities for itsTerminals business, as demand for more infrastructure to storeand handle various energy products continues to increase. Alongthe Houston Ship Channel, KMP acquired a network ofpetroleum coke handling facilities and is expanding liquidsstorage capacity at the Pasadena and Galena Park terminalscomplex. On the East Coast, KMP purchased the Port Mobilliquids terminal in New York Harbor, which has almost 3 million barrels of storage for petroleum products, and isexpanding capacity at the Perth Amboy liquids terminal in NewJersey. In the Southeast, this segment plans to make significantexpansions at certain facilities to capitalize on increasing coalimports, and is working with customers to build incrementalstorage for ethanol, ultra-low sulfur diesel and bio-diesel toaccommodate changes in the marketplace. KMP is also pursuingterminal opportunities in Canada to support increasing oilsandsproduction in Alberta.

TERASEN ACQUISITION

On Nov. 30, 2005, KMI completed its acquisition of Terasen Inc., which significantly broadened the company’sfootprint in Canada. This acquisition provides KMI with assets,resources and access to capital that are enabling the company toaccelerate its business strategy across North America. Thetransaction is expected to create significant immediate and long-term value for KMI shareholders.

KINDER MORGAN CANADA

Kinder Morgan Canada (formerly Terasen Pipelines) is based in Calgary and transports up to 960,000 barrels/day of crude oil,petroleum products and natural gas liquids through approxi-mately 2,800 miles of pipelines in Alberta, British Columbia,and the Rocky Mountain and Midwest regions of the UnitedStates. These pipelines were the driving force behind the Terasenacquisition, as they give KMI access to the dynamic oilsands inAlberta and offer tremendous growth potential.

In 2005, expansions added approximately 130,000 barrels/day of capacity and 600,000 barrels of tank storage to theExpress-Platte pipeline system, which delivers crude oil fromHardisty, Alberta, to Casper, Wyo., and on to Wood River, Ill.Looking ahead, KMI has announced C$600 million ofexpansions for the Trans Mountain pipeline system that willincrease capacity from 225,000 to 300,000 barrels/day by late2008. This two-staged project, which has received commercialsupport from shippers and producers, is part of a growth strategyto provide customers with additional capacity to move growingoilsands production to the West Coast. Trans Mountaintransports crude oil and refined products from Edmonton,Alberta, to marketing terminals and refineries in the Vancouver,British Columbia, area and to Puget Sound in Washington state.Kinder Morgan Canada also plans to expand the Corridorpipeline in Alberta, a dual 285-mile pipeline system thattransports diluted bitumen to and from the Muskeg River Mineand Shell’s Scotford Upgrader.

TERASEN GAS

Based in the Greater Vancouver area, Terasen Gas is the largestnatural gas utility in British Columbia. It is a low-risk, regulated natural gas distribution company that serves almost900,000 customers and produces stable cash flow.

In 2005, Terasen Gas ramped up marketing efforts, madeinroads with builders and developers in the residential marketand added almost 17,000 new customers. Looking ahead,Terasen Gas is moving forward on significant infrastructureprojects to help meet regional needs. For example, it continuesto explore plans to build a 1 billion cubic foot LNG storage

Oil production at SACROC and Yates is driving CO2 business.

Terasen Gas is targeting 1 million customers by 2010.

facility on Vancouver Island and a pipeline that will delivernatural gas to Whistler in time for the 2010 Olympics.

NGPL

Natural Gas Pipeline Company of America (NGPL) reported2005 segment earnings before certain items of $436.9 million,representing an 11 percent increase from 2004 and exceeding itspublished annual budget of 5 percent growth. NGPL had aterrific year, successfully re-contracting and entering into newfirm transportation and storage contracts with such companies asMidAmerica, Peoples, ONEOK, Nicor, NIPSCO and BP. Firm,long-haul transportation capacity on NGPL is virtually sold outthrough February 2007 and storage is fully contracted untilApril 2007. NGPL also benefited from facility expansions thatincreased storage and cross-haul service on its system.

Throughput volumes were up 8 percent for the year prima-rily due to strong demand on the Gulf Coast and Louisianapipelines and high utilization on the Amarillo and the cross-haulpipelines. The level of throughput has only a modest impact onearnings, however, because the vast majority of NGPL’stransportation and storage revenues come from contractually-secured demand charges that customers pay regardless of theamount of natural gas they ship through the pipeline.

In 2006, KMI expects to invest approximately $80 millionto increase pipeline and storage capacity on the NGPL system.An expansion of the Amarillo cross-haul line, which is expectedto commence service in the spring of 2006, will provideproducers in the growing Barnett Shale supply basins withgreater access to attractive markets via the NGPL system. NGPLalso plans to boost the capacity of a segment of its pipeline inthe vicinity of the Texas-Oklahoma border by the fall of 2006. In addition, 10 billion cubic feet (Bcf ) of incremental storagecapacity at the Sayre facility in Oklahoma is expected to beginservice in the spring of 2006, and about 10 Bcf of additionalstorage capacity will also be added at the North Lansing facilityin east Texas, with an anticipated in-service date of spring 2007.

NGPL is one of the premier pipeline systems in the countryand provides both transportation and storage services tocustomers. It has over 600 points of interconnection withinterstate and intrastate pipelines, local distribution companiesand other end users.

RETAIL

Retail reported annual segment earnings of $58.2 million, down16 percent from 2004. Lower residential and commercialvolumes, due to a combination of consumer conservation andwarmer than normal temperatures, along with a decrease inagricultural loads, were factors in this segment’s earnings decline.

In Colorado, growth continued as Retail added meters andload growth, primarily on the Western Slope. Over 3,700 newmeters were connected in Colorado in 2005 and similar growthis expected in 2006.

KMI filed for a rate increase with the Wyoming PublicService Commission in February 2006 to increase the non-gascomponent of the rates to offset significant increases in the costsassociated with providing natural gas service to approximately71,500 customers across Wyoming. The new rates are subject toreview and approval by the commission. The Retail division isalso planning a similar general rate increase filing this year in Nebraska.

Approximately 68 percent of Retail’s customers are locatedin Wyoming and Nebraska, where they are eligible to participatein KMI’s nationally recognized Choice Gas program. Choice Gas allows customers to choose their natural gas supplier and apricing option, such as rates that lock in for a 12-month period.Price-stable options have been identified as the single mostimportant issue for gas utility customers nationwide.

POWER

Power generated 2005 segment earnings of $19.7 million, upsignificantly from 2004 and ahead of its published annualbudget. This segment benefited from a strong performance at the Ft. Lupton, Colo., power plant and from providingoperating and maintenance management services at a new 103-megawatt combined-cycle natural gas-fired power plant inSnyder, Texas, which began generating electricity for KMP’sSACROC operations late in the second quarter. (The resultsnoted in this segment do not include a reduction in the carryingvalue of the company’s interest in a power plant in Colorado,which is detailed in the attached Form 10-K.)

NGPL expects to generate 30% of KMI’s segment earnings in 2006.

Retail expects about 6% customer growth in Colorado in 2006.

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Kinder Morgan, Inc. (NYSE: KMI) has delivered an average annual return to shareholders

of approximately 39% from July 1999 through 2005.

OFFICE OF THE CHAIRMANRichard D. Kinder Chairman and Chief Executive Officer

C. Park ShaperPresident

Steven J. KeanExecutive Vice President and Chief Operating Officer

OPERATING OFFICERSIan D. AndersonPresident, Kinder Morgan Canada

Jeffrey A. ArmstrongPresident, Terminals (KMP)

Thomas A. BanniganPresident, Products Pipelines (KMP)

R. Tim BradleyPresident, CO2 (KMP)

R. L. (Randy) JespersenPresident, Terasen Gas

Scott E. ParkerPresident, Natural Gas Pipelines

Paul R. SteinwayPresident, Power

Daniel E. WatsonPresident, Retail

CORPORATE OFFICERSRichard L. BullockVice President and Chief Tax Officer

Kimberly Allen DangChief Financial Officer and Vice President,Investor Relations

W. Garner DotsonVice President, Internal Audit

David D. KinderVice President, Corporate Development and Treasurer

Joseph ListengartVice President, General Counsel and Secretary

Henry W. NeumannVice President and Chief Information Officer

Larry S. PierceVice President, Corporate Communications

James E. StreetVice President, Human Resources,Administration and Information Technology

Debra M. WitgesVice President and Controller

BOARD OF DIRECTORSEdward H. Austin, Jr.Director and Executive Vice PresidentAustin, Calvert & Flavin, Inc.San Antonio, TX

Charles W. BatteyConsultant and Community VolunteerOverland Park, KS

Stewart A. Bliss (1), (2)

Financial Consultant and Sr. Business AdvisorDenver, CO

Ted A. Gardner (3)

Managing Partner,Silverhawk Capital PartnersCharlotte, NC

William J. HyblChairman, Chief Executive Officer and TrusteeEl Pomar FoundationColorado Springs, CO

Richard D. KinderChairman and Chief Executive Officer Kinder Morgan, Inc.Houston, TX

Michael C. MorganPresidentPortcullis Partners, L.P.Houston, TX

Edward Randall, III (4)

Private InvestorHouston, TX

Fayez S. SarofimChairman and PresidentFayez Sarofim & Co.Houston, TX

James M. StanfordPresidentStanford Resource ManagementCalgary, AB

H.A. True, IIIOwner/DirectorTrue CompaniesCasper, WY

Douglas W. G. WhiteheadPresident and Chief Executive OfficerFinning International Inc.Vancouver, BC

(1) Lead Director(2) Chairman, Audit Committee(3) Chairman, Compensation Committee(4) Chairman, Nominating and

Governance Committee

SHAREHOLDER INFORMATIONHeadquarters: 500 Dallas Street, Suite 1000Houston, TX 77002(713) 369-9000

Exchange Listing:New York Stock ExchangeTicker Symbol: KMI

Transfer Agent, 1099s and Cash Dividends:Computershare Trust Company, N.A.(formerly EquiServe)PO Box 43069Providence, RI 02940-3069(800) 847-4351www.computershare.com/equiserve

All other inquiries: Investor Relations(800) 324-2900 or (713) 369-9490E-mail: kmi_ir@kindermorgan.com

Please visit our web site at

www.kindermorgan.comfor investor information

500 Dallas Street, Suite 1000Houston, Texas 77002(713) 369-9000

www.kindermorgan.com

2005 ANNUAL REPORT